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What You Should Look for in Mergers and Acquisitions: MSPtv Episode 40

Mergers and Acquisitions can be exciting events for Managed IT Service Providers. Being acquired can provide access to new product lines, clientele, and knowledge on new technology. But before you sign on the dotted line, it's important to see if your business can really mesh well with your new business partner. Sure, there is a big financial reward in M&A's, but having a similarity in culture and intentions can be just as important in the long run. One of our partners, Jay Ryerse, CEO of JTECH Networks, was recently acquired by Digitel Corporation. We decided to sit down to speak with him about the recent acquisition. Tune in!

Have any suggestions for an MSPtv episode? Want to give us your feedback? Email us at mspnow@continuum.net and let us know what you think!

Episode Transcription:

Scott: Hi, and welcome to another episode of MSPTV. I'm Scott Glidden, and with me today is Jay Ryerse. How are you Jay?

Jay: Doing great.

Scott: Good. Jay is with JTECH networks out of Atlanta, recently purchased by Digital. Tell us a little bit about yourself, Jay.

Jay: So I'm now the VP of Business Development for Digital Corporation. Digital is a 31 year-old Atlanta based telephone systems provider who wanted to move into the IT space. And I come from IT services. I ran an MSP in the Atlanta area. We grew and got to a point where it was time to make a decision.

Scott: Now tell me a little bit about JTECH. What was your corporate approach and what were the value that you brought the customers?

Jay: I think like a lot of MSPs, we provided a proactive solution to a normal business. A business for us was anywhere from 5 to 250 employees, with computers, that is. And we did everything we could to become their IT department.

Scott: Now did you tell, coming from that telecom side of the equation looking at JTECH, what was the marriage there? What did it really provide for the two of you?

Jay: Well, it was interesting because as everybody knows, there's conversions going on. The telephone systems, the copiers, everything else that's out there are plugging into our network. And so Digitel looked at it and said, "You know, we're selling more and more IP based solutions from Cisco, and those kinds of products, and they needed to expand to the IT space.

Well, they build a data center and had that piece of it. They never figured out how to provide that desktop and server level support that's similar to JTECH provided.

Scott: And as you just said, there's a lot of change going on in the industry right now, both for MSPs looking to make acquisitions and being acquired. What does that really do for those two companies? What did it do for JTECH?

Jay: For us, it gave us two big product lines that we didn't have that we always outsourced. We had the ability to sell data center services, cloud, VDI, Citrix, Microsoft, VMware type solutions, and it gave us a full Cisco arsenal of engineers to handle the networking infrastructure. At the same time another end of the equation, we started selling phone systems. Rather than outsourcing the VOIP and the on premise solutions, we now sell them as part of our business.

Scott: Right. That's attractive.

Jay: Yeah. It's been very good for us.

Scott: And what do you see from your perspective now? It's been about a year since the takeover. Talking to another MSP, what would you say to them about that convergence that's going on right now?

Jay: First off, you've got to do what's right for your business, and you'll know when it's time. But if you wait too long to pay attention to what the market's doing, you're gonna miss out on either a chance to do well by selling your business or merging with other like businesses, and you'll miss out on the scale and the opportunity to sell additional products into a base that was looking for our help.

Scott: And did you really find with digital that you found, and I'm sensing this from what you're saying, a corporate culture that was similar to yours about how you treated your customers and employees?

Jay: Very much so. When we were looking at companies, and we didn't really look at a lot of them. When we were approached by Digital, we were very excited about their integrity, the honesty, and the things that they brought to their solutions they deliver. Their professionalism has been great. And their delivery teams across all the different product lines that they offer had been great, and has merged very well with the things that we do for our clients.

Scott: So it's been a year. It's been good, and how about your employees from JTECH? Are they pretty happy?

Jay: Yes. You know, with every acquisition there are issues. You gonna have to take on some role changes. It used to be I could write a check. That does change. There are checks and balances and my department will tell you that I would like to have that functionality.

But outside of that, if both sides have good intentions going in, you can make the synergies of the two businesses and the models and the client bases work. On Day One we had an issue where we had a customer in Texas, and we're based out of Atlanta so that wasn't local, with a firewall problem. One of their Cisco guys jumped on and took care of it for us and no problems. Within an hour the Digital team was having a problem with a customer with an exchange server, and so we had that expertise. We merely jumped in and were able to help solve that problem. So it's trying to see those synergies, and it's fun. And that's how we looked at it.

Scott: Right. And for those coming from the office equipment side or Telco side, for them it's a different product to be selling, quite honestly. IT manage services is not in their wheel house on a normal basis.

Jay: It's not, and what we see is that their service delivery models are different. A typical office company, copier type of company, it has a phenomenal sales and marketing engine, but they don't have the engineers on staff to deliver the solutions that we're accustomed to delivering.

From a telephony side, same thing. They're starting to understand IP, but they don't have the knowledge that we have to make that work. And so we've been able to mix and marry those together, and it's been good for everybody.

Scott: Yeah. Now, JTECH was your baby. About 11 years you were in business and so forth. For you personally, what has it meant?

Jay: Obviously, there's a financial reward attached to it, but I love what I do. And if you know me, if you've seen me at any of the other events out there, you'll know that taking care of a customer, taking care of our employees is just part of my DNA. And so it's been a lot of fun because now I've got a bigger market, a larger base of people to work with, to go out and sell more.

And that was one of our largest reasons why I wanted to do the deal is because we had this really good marketing engine and the ability to deliver services, and Digitel had a client base of about 15,000 embedded customers.

Scott: Right. That's attractive.

Jay: It was a good chance for me to stay involved and to help grow the business that I started many years ago.